UBS and Commerzbank were joint lead
managers with Barclays as joint lead no
books.
YEN
BPCE RIDES STRONG DEMAND FOR
SNP BONDS
BPCEûRAISEDûcBNû53BN ûINûTHEû
Samurai bond market last week with 98% of
the deal in senior non-preferred format,
offering further proof of strong Japanese
investor demand for loss-absorbing capital
instruments.
The French bank offered senior and
senior non-preferred bonds in the
lVE
TRANCHEûDEALû4HEû3.0ûPORTIONûHADû
INITIALLYûCOMPRISEDûlVEûANDû
YEARû3OCIALû
bonds, but, as demand for the 10-year
EXCEEDEDûTHEûcBNûCAP ûTHEû&RENCHûBANKûATû
the last minute decided to add a 10-year
non-Social tranche with the same terms
EXCEPTûFORûTHEûUSEûOFûTHEûPROCEEDS
4HEûcBNûlVE
YEARû3OCIALû3.0ûPRICEDûATû
50bp over swaps with a 0.645% coupon,
while both the ¥40bn Social and ¥10.9bn
non-Social 10-year SNPs priced at 69bp over
swaps with a 0.989% coupon. The spread for
THEûlVE
YEARûLANDEDûATûTHEûTIGHTûENDûOFûTHEû
initial 50bp–55bp range, while the spread
for the 10-year was near the tight end of the
68bp–72bp range.
The far smaller senior preferred portion
WASûSPLITûBETWEENûcBNûOFûûlVE
YEARû
and ¥1.2bn of 0.549% 10-year notes. The
spreads over yen offer side swaps were 10bp
and 25bp, respectively.
These two tranches had been marketed
on a reverse enquiry basis and priced at the
wide end of the initial guidance ranges of
5bp–10bp and 20bp–25bp. Nevertheless, the
issuer wanted to show its commitment to
Japanese investors by issuing them, in spite
of their small size, to accommodate the
entire spectrum of demand.
The successful reception of the SNP
portion underlines the strong demand for
TLAC/MREL bonds among Japanese
investors.
“More than 120 accounts participated just
for the SNP portion,” said a banker on the
deal. “This shows how strong demand is for
SNP from Japanese investors.”
As with the recent MREL/SNP deals from
Lloyds Banking Group and Credit Agricole,
regional investors were actively involved,
continuing a trend that began after Japan’s
Financial Services Agency in mid-April
CLARIlEDûTHEûCAPITALûTREATMENTûOFûBANKSû
holdings of TLAC bonds.
Regional investors took 40% of BPCE’s
lVE
YEARû3.0û3OCIALûBONDSûANDûûOFûTHEû
10-year SNP Social bonds.
The lower regional participation in the
10-year SNP was due to demand from life
insurers and other central investors
attracted by the near-1% coupon and the ESG
feature. Another banker on the deal said one
insurer started participating by buying the
10-year SNP.
Daiwa, Mitsubishi UFJ Morgan Stanley, Natixis,
Nomura and SMBC Nikko are the lead
MANAGERSûONûTHEûDEALû%XPECTEDûRATINGSûAREû
!!!!û-OODYS30&ITCH2) ûFORûTHEû
senior preferred and BBB+/A/A– (S&P/Fitch/
2) ûFORûBOTHûSENIORûNON
PREFERREDû3OCIALû
and non-Social notes.COVERED BONDS
EUROS
COVERED BOND SUPPLY HITS HIGHEST
POINT SINCE JANUARYCovered bond supply reached €7.25bn last
week, the third highest weekly volume in
2018, as banks took advantage of better
EXECUTIONûCERTAINTYûINûTHISûSECTORûTHANûANYû
other part of the market.
4HEûWAVEûOFûISSUANCEûINCLUDEDûTHEûlRSTû
Italian deals since January, from INTESA and
MEDIOBANCA, as well as €2.25bn from
Germany. SPAREBANKEN VEST BOLIGKREDITT,
STADSHYPOTEK and RLB OBEROESTERREICH also
returned to the market.
The week fell only just short of the
year’s busiest for covereds in early
January, when lenders priced a combined
€8.63bn.
“The good thing about covered bonds is
that it’s always a product that works,” said a
syndicate banker.
“We may have each and every other
market looking tough but you can still bring
a covered bond. Issuers appreciate this as it
means that there is always something they
can do for funding.”
Euro-denominated bank and insurance
sub issuance is more than 25% behind
2017’s run rate, according to IFR data,
while euro covered issuance is nearly
20% ahead, having passed €97bn.
%UROûSENIORûISûROUGHLYûmAT ûATûAROUNDû
€85bn.
Issuers largely trimmed initial guidance
by 2bp to 4bp, with average new issue
concession around 4bp. Order books ranged
BETWEENûõBNûANDûõBNûWITHûTHEûEXCEPTIONû
of RLB OBEROESTERREICH, which only attracted
€700m-plus for a €500m 10-year at 5bp over
mid-swaps.
MEDIOBANCA also struggled to take off,
gathering €500m-plus in orders for itsõMûSIX
YEARûDESPITEûTHEûMOREûTHANûBPû
concession in a sign of investor caution
around Italy.
While more issuers are likely to pack in
deals ahead of the summer break, this pace
of supply is unlikely to be sustained.
“Issuers have brought forward their
issuance plans for the year to take advantage
of low rates and continued ECB purchases,”
Societe Generale analysts wrote in a note.
“Looking at our full year issuance forecasts
we had announced last November, many
jurisdictions are already close to or have
surpassed our initial full-year estimates.”
4HEûlRSTûBANKERûDISMISSEDûCONCERNSûOVERû
saturation.
“The market still seems able to absorb new
issues. As long as you get the parameters
right, you’re not in danger,” he said.DECENT SPREAD TO BUNDS PROVES
HARD TO RESIST IN PFANDBRIEFEAttractive pricing versus governments has
proved hard to resist for covered bond
investors, who piled into trades last week
with German Pfandbriefe particularly in
favour.
BERLIN HYPûlREDûTHEûOPENINGûSALVOûLASTû
Monday, notching up its largest covered
issue of the year, a €750m long four-year
that was priced at 10bp through mid-swaps,
equivalent to 44.5bp over Bunds.
It was followed by more benchmark
issuance from MUENCHENER HYPO, with a
€500m November 2027 trade that priced at
8bp through mid-swaps, equivalent to
48.5bp over Bunds.
The stand-out deal of the week came from
HSH NORDBANK, however, which lured more
THANûõBNûOFûDEMANDûFORûAûõMûlVE
year, allowing leads Barclays, BNP Paribas,
Deutsche Bank, HSH and NordLB to move
GUIDANCEûBYûBPûFORûAûlNALûPRINTûATûBPû
over mid-swaps.
“It came at an attractive spread over
Bunds,” said a lead on HSH, which came at
73.6bp over the government.BONDS COVERED BONDSALL COVERED BONDS (ALL CURRENCIES)
BOOKRUNNERS: 1/1/2018–30/6/2018
Managing No of Total Share
bank or group issues US$(m) (%)
1 LBBW 45 8,184.92 6.1
2 Natixis 35 7,929.54 5.9
3 HSBC 41 7,872.41 5.9
4 UniCredit 41 7,545.87 5.6
5 Commerzbank 36 6,611.52 4.9
6 Deutsche Bank 27 6,086.00 4.5
7 Credit Suisse 26 5,912.63 4.4
8 Credit Agricole 29 5,691.16 4.2
9 SG 28 5,673.40 4.2
10 Barclays 25 5,073.70 3.8
Total 172 134,201.89
Source: Thomson Reuters SDC code: J15a